This is an appeal from a judgment in summary judgment that was entered against the plaintiff below, the petitioner here.

This is an action brought under the provisions of Section 4 of the Clayton Act which allows any person who is injured in trade or rather in his business or property to -- by reason of violations of the antitrust laws to sue thereof and obtain his damages to the treble and counsel fees to be granted.

There are six issues that were raised in the petition for a writ of certiorari to the Ninth Circuit.

I think major the issue before the Court is whether or not a major oil company, who is having thousands of service station sites, can regiment a dealer organization admittedly composed of independent businessmen who are in business for their own profit or loss by a scheme which involves the issuing of a one-year lease and then (Inaudible) dependant on whether or not the dealer prescribes or obeys retail price fixing orders.

This is regardless of the fact of whether or not the dealer -- regardless of how long he has been on that service station site and regardless of the fact that it is admitted that the respondent does continually renew these one-year leases as a matter of its practice to those dealers who do obey the orders of the respondent Union Oil company.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: Yes, Your Honor.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: That was an allegation in the complaint.

The complaint specifically alleges that he lost his service station business because he did not obey price orders and that he was threatened by respondent's agents that he would better raise his prices or he would be out of the service station site.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: Your Honor, we are in a situation here where these facts are stipulated by counsel for respondent and let me answer your question by enumerating at this time the stipulations that are in this record as I understand them as a result of the pretrial proceedings in the District Court.

Let me say as to that matter that petitioner had filed interrogatories to the respondent mainly on the interstate commerce issue and that the District Court thereupon entered an opinion in which he said that he did not feel that pretrial discovery should be granted until pretrial conferences which defined the issues.

And thereupon we had two pretrial conferences in which there were suggestions that this case could be first stipulated and then brought to the Appellate Courts.

When that stipulation broke down there was suggestion that counsel for plaintiff file a pretrial statement for a pretrial ruling that counsel for respondent would then admit or deny those facts and that the appeal to be taken in that direction.

Now there -- so that pretrial statement or pretrial ruling is in the record.

However, counsel did not or respondent did not accept this pretrial statement and rather he noticed the deposition of the plaintiff for a deposition.

The deposition was taken.

Portions of the deposition were thereafter abstracted and presented to the Court in a motion for summary judgment on all issues and that motion for summary judgment on all issues, stipulations were further continued by respondents and at that conference it was suggested that plaintiff, the petitioner here, file a motion for partial summary judgment on the issue of violation of the antitrust laws, which was done.

Now that motion for partial summary judgment was denied and the motion for summary judgment on all issues was granted by the District Court.

Now these pretrial conferences, including the motion for summary judgment raise five distinct stipulations by the respondent Union Oil company.

As I have urged in my brief these stipulations were inevitable because the records consisting of policy letters concerning this consignment program pretty much corroborated and compelled these stipulations.

Now the first is, there is no question that the only lease that Union Oil would write was the one-year lease.

The only consignment agreement was a one-year consignment agreement.

However, that consignment agreement was carried on year-to-year, assuming the lease was renewed.

It was stipulated that the only manner in which a service station dealer could obtain a lease from Union Oil Company was to subscribe or sign the retail dealer consignment agreement of Union Oil Company.

Now, this particular tie-in affected approximately 2000 service station sites in the eight specific state areas and also the consignment agreement was entered into with other purchase and sales accounts so that there are (Inaudible) here in 2000 tie-in consignment agreements and an additional approximately 1000 consignment agreements with other types of accounts.

It is also stipulated that a lease would not be renewed if the dealer did not carry out the authorized directives of the consignment retail price fixing program.

It was further stipulated that this particular plaintiff's lease was not renewed at the end of the year because he did in fact disobey the orders of Union Oil Company and I think it is fair to say he did not obey the price fixing order, I think it's narrowed to that extent, the price fixing orders.

I have in my brief set forth that quotation in full I believe.

I would -- the record of 409, “It is a conceded fact in the case that he, the plaintiff, did violate the consignment agreement because he refused the charges which is principal of the Union Oil Company prescribed for him to charge.”

Then he goes on above that and says, “We did not give him a new lease because he violated the consignment agreement” and see also record citation 299, where that stipulation is put into the moving papers of the respondent.

The --

Justice Potter Stewart: Who is speaking there at Page 409, is that counsel for respondent?

Mr. Maxwell Keith: That is counsel for respondent.

Unknown Speaker: (Inaudible)

Mr. Maxwell Keith: That is Mr. Lasky the counsel for respondent.

Unknown Speaker: (Inaudible)

Mr. Maxwell Keith: That is the stipulation, yes and also that stipulation is put in writing at the record 299.

In addition, the last stipulation, I would like to call for the Court's attention, is the fact that the respondent for -- the counsel for the respondent stipulated that a purpose of the retail dealer consignment program was to fix prices.

One state in the record -- one section of the record was a purpose and then it was a purpose among other purposes was to fix the retail prices.

Now in addition as I have indicated to these stipulations during the pretrial proceedings counsel for the respondent submitted to the plaintiff's counsel the so called policy letters, which were letters issued by the general sales manager of the Union Oil Company to the division managers in which he explains in detail, gave instructions to them concerning this consignment program.

Now we were touching upon the issues of the case but believe the major issue would be that first issue whether or not you can regiment a marketing system and cull off independent judgments as to prices by utilizing this one-year lease renewal as a record.

Justice John M. Harlan: Could I ask you a question?

As I understand it, the Court of Appeals did not reach the substantive question --

Mr. Maxwell Keith: The Court of Appeals assumed a violation of the anti-trust laws and went on the ground that there was no actionable damages and utilized the doctrine of consent and ruled that when a dealer entered into the lease consignment structure of Union Oil Company with his eyes wide open, he knew he is going to have to sign this agreement that he could not thereafter obtain damages because he had full knowledge and he walked into the scheme with his eyes wide open.

And it also applied the same doctrine of consent to the secondary aspect of the plaintiff's case which was claiming that prices were fixed during the period of in-station occupancy pursuant to coercive program, which was structured upon lease renewal, and there upon the dealer suffered injurious price fixing orders for which he could be compensated under Section 4 of the Clayton Act.

And as to that the Ninth Circuit Court of Appeals said when the state of the record shows that the dealer does in fact charge his own price and raises the conflict of facts between the supplier and the dealer that he cannot thereafter sue for in-station damages because in fact he could charge his own prices.

The only theory was that he had -- he couldn't get the station the next year, although he had expended substantial money for the service station business.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: It was two one-year leases and the order came in -- the letter of non-renewal came in one month before the lease was to terminate.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: He -- I think the record will be undisputed that he was to charge on the regular type of gasoline 29.9 that his competitors -- his three immediate competitors were charging 27.9 that he asked the respondent's agents to meet this price and that he was refused and that thereafter he set it at 27.9.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: And that's what precipitated this matter.

So the second issue before the Court is whether or not the doctrine of consent, a court doctrine has application to a Section 4 action based upon lease, non-renewal or lease cancelation when the dealer did have knowledge of the consignment program of the respondent.

Now I think there should be a distinction made here that's important and that is whether or not assuming that a consent doctrine can be applied, which I allege cannot be, whether or not that can be made in summary judgment because the consent even in classical tort doctrine has usually been an affirmative defense and has been raised only upon the factual showing at a trial.

Now here the doctrine was applied in a summary judgment situation and here it was applied when the record clearly showed protest by the petitioner against the orders of the defendant or the respondent here.

Now my motion for a partial summary judgment is based upon stipulations and I believe positive and unrefutable proof in the record, the question is whether or not plaintiff is entitled to finding the fact based upon stipulation that lease non-renewal has been used and will be used in order to regiment a price fixed organization.

And I urge that this stipulation constitutes violations of both Sections 1 and Sections 2 of the Sherman Act.

Another issue before the Court is whether or not we are talking about consignment or we are talking about resale price fixing because I urge upon the Court that we don't have a consignment agreement here at all.

What we have here is a resale price fixing agreement.

Then we have a last issue as to whether or not plaintiff's right to trial by jury has been violated in view of the fact that counsel at all times herein in his moving papers attempted to preserve a right to trial by jury for the plaintiff below.

As heretofore indicated, the petitioner is a service station dealer and he obtained one of the best available sites that Union Oil Company had in its chain in May of 1956.

He had been employed by the company and upon the termination of his employment, he was offered by his agents his choice of the best available site of the chain and he picked a very good service station site in Fresno where he had a relative.

Justice Potter Stewart: He got a going business (Inaudible)

Mr. Maxwell Keith: I think it was – I am really not too sure of that, but I believe it was a new station that was available at that time.

The petitioner in order to obtain this service station site was handed his one-year lease, was handed his retail dealer consignment agreement, which he signed.

And also I would like to point out that in order to obtain the station he was required to spend approximately $3500 of his own in order to obtain the necessary equipment and supplies to run that service station business.

He was -- at the end of the year, as is customary, he was given another one-year lease.

The record shows that that time protested consignment and he did take the lease and continued to be a so called consignment operator during the remainder of that one-year period.

The respondent, Union Oil Company of California, is one of the largest of the seven major fully integrated oil companies on the West Coast.

It explores for oil.

It refines oil into petroleum.

It distributes and retails petroleum products.

The record shows and the complaint alleged that in addition to supplying retailers under the banner of Union Oil company, it distributes substantial quantities of its refined petroleum products to so-called off brand service stations who will sell this gasoline of Union Oil Company under different trade name.

And I think the record also shows by way of depositions that I had taken that these off brand companies attempt to sell their gasoline at $0.01 or $0.02 below the established price that the majors have, the fully integrated companies.

Around 1954, the later part of 1954, the defendant promulgated its retail dealer price fixing consignment program and the ostensible and the written purpose was in order to control prices.

And the letters from the general sales manager say to the people in the field that these agreements are to be used when we want to control prices in a price war situation.

That when the price war situation is over, the dealers will go off, consignment will put them back to purchase and sales, that's in the beginning of the program.

Respondent points out that around May of 1955 that a change was made and that the respondent company attempted to make the consignment program a permanent measure and not one that was to be temporarily used in a price war situation, but you'll notice in the record, “The statement continued we will use consignment when we want to control retail pricing.”

Now we have established the policy of the one-year lease and the policy of the tie-in.

The affect of this tie-in policy was to establish uniform and non competitive prices in the eight western states as far as Union Oil Company was concerned and its three thousand dealers under the consignment program.

Because the orders were in the beginning charged one or two cents over your major competitors, and by major they are referring to the fully integrated majors, later the orders were charged the same as the predominant major price which is the major oil companies or charged what Standard Stations, Inc., charges, whichever is the lower price.

And these were the prices that were established in the policy letters, uniform prices based upon what Standard Station was charging.

Now we know that those prices were regimented under the threat of non-renewal of these one-year leases not only by reason of the stipulation of counsel, but by reason of the record, which shows a letter that states that we will refuse – “We will review rather all the dealers who have not agreed to our consignment program even to the extent of losing the business.”

And we know when changes were made in the consignment program, in the consignment agreement itself, the orders were, “Those dealers who do not agree to sign or subscribe to the new agreement, we will send him a letter of cancellation and when that letter -- when the time of cancellation has expired, we will then give him the new agreement to be signed and subscribed.”

The obvious inference is if he doesn't sign or subscribe it, his lease is not going to be renewed.

Now the retail dealer consignment agreement itself places virtually all the risk of the business on the dealer, just as the lease does.

He is responsible to his employees, and Union Oil has no responsibility insofar as the employees of the dealer are concerned.

He is responsible for all the business fees and the license fees and all the taxes except the reserved property taxes which Union Oil claims to pay.

Then all the risks of property damage, personal injury liability are placed right on the dealer.

The only insurable risk that the respondent claims to cover are those caused by natural catastrophe, that if there is leakage in the pumps or if a car runs amuck and knocks a pump over and a gasoline is spilled, or if there is theft that the dealer will carry the burdens of that kind of loss and not Union Oil company.

Now the agreement of course expressively provides Union shall fix the price of gasoline and it does so, on the assumed basis that it is giving the dealers a commission upon the sale of the gasoline.

Now this commission when it first came out was very much equivalent to margin.

Now the commission was simply the base -- the difference between the authorized consignment price, which is a retail price, and the Union Oil Company's tank wagon price or the wholesale price.

However, the agreement provided that a commission would be guaranteed, and that will be the 6.5 or 5.5 before rent.

There's some dispute as to which figure was to be used, which was to be guaranteed.

Later a change was made so that the consignment agreement provided that the dealer would assume 50%, one half of the difference between the authorized consignment price and a so called normal retail price when the consignment price went below this normal retail price.

Then in March of 1958, in a letter written by respondent's general sales manager, “in order to be on the same basis as purchase and sale of the company and in order to have the dealer participate in price decline, the respondent Union Oil Company determined to have the dealer absorb 20% of the decline in prices” and no more guaranteed commissions.

What they did do is they sent a letter to the dealer saying we are going on this new program, you will have a commission guaranteed, however we reserve the right to cancel this letter at any time.

And as you study the sliding scales of the respondent in March of 1958, you will see that they are all based upon a 20% participation of a price decline, and whereas in the old days the 5.5 or the 6 cents was there, in the new sliding scale they go down to 3.5 cents commission.

I have touched upon the facts relating to the cancellation of the plaintiff for the non-renewal of his one-year lease.

The fact that he was attempting to meet a market situation that he asked to be able to meet this that he was refused.

And I'd like to point out at this point that the answer or the complaint first alleged that plaintiff was threatened with lease cancellation quietly by agents.

And the answer in effect admits that an agent of the Union Oil Company came to petitioner's service station and told him that they could do what they could -- would do in order to raise the price of petitioner.

Now the deposition of the petitioner says that the agent, a district manager, Mr. Kirkberg, came marching in and said, “You had better raise those prices and unless you do, I am going to call Mr. Raff in Los Angeles and we will use the full power of Union Oil Company to make you raise those prices.”

Mr. Simpson held on to his 27.9 price and a short time later he was told that his lease will not be renewed.

This, however, was not the full end of the story because Mr. Simpson had spent 16 hours a day for about two years at that station and he didn't want to give up and so then the lease --

Justice Potter Stewart: Under the then existing arrangement between Mr. Simpson and Union Oil at 27.9 a gallon, how did Mr. Simpson bear financially?

Mr. Maxwell Keith: I don't think he did well that money.

Justice Potter Stewart: Well I mean, how -- per gallon was there any profit in it for him, no?

Mr. Maxwell Keith: The profit and loss figures are in the record.

That would be his profit figures in March and I believe they show a profit of $266 for March 1958.

Justice Potter Stewart: From the operation of whole station is it not or --

Mr. Maxwell Keith: That that's on the -- that's in the profit on the station.

Justice Potter Stewart: What was he getting the gasoline from Union Oil, at what price?

Mr. Maxwell Keith: I believe that the record would not indicate that at this stage of proceedings Your Honor.

Justice Potter Stewart: You probably you told us earlier that the arrangements involving that they -- and ended up with an arrangement by which the station operator would share (Inaudible)

This program was to be affected beginning the March of 1958 and the record is uncertain as to whether or not there was any -- whether that particular program reached Simpson and I doubt that it did.

He was still operating on this old arrangement of the 50% situation with the guaranteed commission.

What happened all these delivery tickets, gasoline delivery tickets, were submitted to the respondent and they were attached to the deposition that they were not put in the record as part of appellate record.

But we do have that in the record below those gasoline delivery tickets were submitted to the respondent and they were attached to the deposition, but they were not put in the record as part of the appellate record, but we do have that in the record below those gasoline delivery tickets.

Mr. Simpson attempted to convince someone in the Union Oil organization that a wrong had been made, and a wrong was to be done and he urged his customers to send letters of protest to the Chairman of the Board of the Union Oil company.

And Mr. Simpson apparently obtained 230 customers to support his campaign to keep his service station, but this was not going to change anybody's mind.

As a matter of fact just the opposite occurred.

The General Sales Manager Mr. Rath was dispatched to Fresno and he told Mr. Simpson that he understood, that he didn't want to leave the station, and he advised Mr. Simpson that Union Oil was going to have to make him leave that station.

He told him about a story about two dealers that had been -- had to be bodily turned out of the station and he told Mr. Simpson that he doesn't have much money and he better not try and tangle with the power of the Union Oil Company and the threat was made good.

He obtained temporary restraining order for approximately five days.

On argument that was canceled, no preliminary injunction was granted and Mr. Simpson left the service station and it has been in the hands of another person ever since.

And it's interesting also to show that the -- at the time of this, desire to have Simpson keep his prices up, there were apparently conversations between the Union Oil Company, representatives of the (Inaudible) company with respect to retail prices.

I think the inference is pretty clear, that there was a situation were prices were to go up on Ventura Avenue in Fresno.

Now the District Court on argument, both the summary judgment and the motion for partial summary judgment ruled that the consignment program was valid and that Dr. Miles and Parke Davis did not affect a consignment situation.

In fact saying that by consignment you can do what you can do by the way resale price fixing.

It also ruled there were no actionable damages and that the damages were speculative and uncertain.

The Ninth Circuit Court of Appeals did not go with the District Court on the issue of validity.

Instead it set forth what it felt were issues of fact and then it announced that the doctrine of consent would bar recovery in this situation and it is interesting to note that the Ninth Circuit distinguished between two kinds of dealers.

The dealers who are on the station at the time of the retail dealer consignment agreement program was originated, and it said as to these dealers there was real -- there might be real coercion and they might have an action because they in order to keep their station they might have to sign this agreement against their will, but the Courts of Appeals did not see anything that would match that kind of a situation and a situation where you are told in order to lease the station, you must sign the consignment agreement.

Although I think that in the description of tie-in by this Court that this Court does use the word coercion in describing a tie-in situation or in order to obtain a desired commodity, a purchaser is required to buy another commodity.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: Yes he gets a guaranteed commission, which is very much equivalent to the margin which a resale dealer obtains, the difference between the tank wagon price and the resale price.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: That's right unless of course the orders were to price yourself above your competition and then you are not going to get any commission because presumably you are not going to be selling any gasoline if you are $0.02 above everybody around you and the commission is based upon the gallons sold.

So that --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: You will have that guaranteed commission.

However, I think as matter of reality there isn't too much of a distinction between this kind of a guaranteed commission policy and the kind of a situation that the Court faced in the Standard Oil case where attempts are made to give the dealer some kind of a dealer aid or some kind of a subsidy.

In each case, the companies don't drop their wholesale price.

Now where do they know that these dealers are in a heavy competitive battle and they hold that price up and they come up with some other, which I think we can call a gimmick or a scheme to subsidize the dealer who is facing the price war situation.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: To a particular dealer and we are talking about across the board price reduction to all accounts who are in the competitive -- in competition with each other.

Now it is urged that the principle of law used by the Court below is not applicable to Section 4 of the Clayton Act statute as doctrine of consent was not supported below by any decision of this Court.

And if we analyze the facts in the Southern Photo Material Case and the Emich case, Moore versus Mead, we find there plaintiffs who had full knowledge, their eyes were wide open, they dealt with a violator and as soon as the plaintiff attempted to rid himself of the injurious impact of a violation of the antitrust laws and he was threatened with action unless he followed out the illegal scheme and carried it out, we find that a treble damage action has been sustained in that kind of a situation.

In story -- in the Southern Photo Material case the plaintiff had dealt with the Eastman Kodak company and had subscribed to it resale price fixing provisions, but then a dispute arose as to selling the business to the Kodak Company and there was a dispute and pursuant to a plan to monopolize the Eastman Kodak Company withdrew its supplies and the treble damage action went to the jury with instructions upon pari delicto.

The jury found for the plaintiff, of course this Court sustained the jury verdict.

In Emich case we have a very similar kind of situation.

There was a General Motors dealer being forced to accept financing arrangements by the General Motors Acceptance Corporation and I think the record shows that the dealer Emich there knew at the time that he obtained the papers from the General Motors Company, giving him the rights to sell the cars, that they had a financing program and during his occupancy, he was warned to continue to obtain more financing through General Motors.

And of course his franchise was terminated and this Court sustained the action although the particular issue before the Court was the effective Section 5 of Clayton Act.

Then the Moore versus, then there was Kiefer-Stewart in which this Court said that the violation of the antitrust laws on the part of the plaintiff did not immunize the defendants for the liability for the injurious acts they committed upon the plaintiff and then in the Moore versus Meads Bakery case this Court held that a plaintiff who enters into unlawful conduct on his own in retaliation for the unlawful conduct of the defendant, thus continues to have a cause of action that his unlawful conduct does not give the defendant any immunity even though the plaintiff enters in the unlawful conduct with full knowledge that there is going to be retaliation by the defendant against him, so I think.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: No I don't think so.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: Well, I was just coming to that.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: Well they could certainly refuse to renew a lease on somebody that was doing something that the ordinary normal reasonable man wouldn't do as a service station dealer.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: Yeah.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: I believe under the Clayton Act that would be permissible without being subjected to treble damage action.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: No Your Honor.

I think the central issue in this case is whether or not a dealer go to a jury on the question of he having a weapon, having been subject to a weapon or a clause.

Now this case I believe is premised on the question of coercion.

Now whether or not a company can issue a price fixing order and say either you obey that order or you are going to lose your business.

Now I think that is the central issue and not -- whether or not this is a valid consignment or not.

I don't see how you can do under a consignment anymore than you can do under the Parke-Davis.

You can suggest prices, you can tell these dealers what the prices ought to be and how they – if they want to run their business at a profit, I suppose you could suggest in some general announcement to the trade but the moment you get into an area of threats and the weapons I don't care whether it's consignment or not, whether it's a valid consignment agreement or not because this is precisely where the area of freedom of bargaining breaks down.

As I understand the distinctions that this Court has enunciated through the Parke-Davis and the Beech-Nut and the Colgate decision is we cannot compel the application of price judgments.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: No I think what I'm really saying is this.

Assuming this is a valid consignment agreement and that these are really valid consignees, what I'm saying the minute they go over the boundaries of the agreement and they adopt means which are either illegal per se or they have adopt means which are beyond this Court's announcements in the Parke-Davis case, in effect they are talking about resale price fixing because the dealer has in effect advocated it, it's his consignment status, and he is saying I want renunciation and they say you cannot have renunciation, you must obey our price and I think certainly one of the standards of consignment as a common law system is that the agent is always free to abandon a consignment program.

Here they are saying you can only renounce under a fear of losing your business.

And I think that is a distinction and not whether or not this is really consignment or not.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: If the cancelation is stipulated to be for the purpose of controlling price under the Sherman Act because --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: Right.

Well I would say that the moment they use this method or means, they are not enforcing the contractual provision.

They are enforcing rather their order upon a dissenting dealer.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: Just as Parke-Davis indicates you make an announcement to the trade, you can indicate, you can refuse to sell supplies, but you cannot take away the business which I think would be the distinction.

Under Parke-Davis you announced that a supplier could refuse the dealer, as a part of a suggested price fixing program, but that's all and no more and the minute the supplier goes beyond the refusal of the supplies and adopts methods or means which compel that he adheres to a price fix order that it's going beyond the Colgate case and I guess that's where we are, It's a Colgate case.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: I would say they are compelled to give you a lease unless they have some other reason other than the price fixing reasons because then they are subject to the charge that they are regimenting a dealer organization.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Maxwell Keith: Well now this question was examined in this case of Osborn versus Sinclair Refining Company on the TBA situation where the Fourth Circuit announced that a single supplier did not have protection under Colgate to coerce an arrangement in restraint of trade.

And in that particular case, the Court approached it on the basis that there was a one-year lease, it had another -- it went from year-to-year that at least the dealer would have had it for an additional year and it based damages upon one-year occupancy.

I had urged or have urged that this is a question for a jury, in the ordinary situation it goes to damages, you present all your available data, how long would the dealer have stayed in because in this case we have the testimony of Mr. Rath, the President of Union Oil Company, later the Chairman of the Board that they continually give leases.

Now it's clearly the jury who is going to be able to have that kind of evidence and is going to be -- have available towards the evidence of the respondent that for some other reasons we could have cancelled this man and let the jury decide how long.

But we know dealers, under Mr. Rath's testimony, have been in the station 15 to 20 years.

We know that advertisement of Union Oil boast of this fact that if you are a Union leader you are going to have a long time occupancy and you are going to be a respected businessman making profit and loss of your own.

Now I urge that this Court has indicated in the Masonite case that regardless of whether or not this is consignment or resale price fixing that the terms of an agreement are not going to hide the basic anti-trust restraining effects of a program from the Court.

If we are going to go behind the façade, we are going to see does this restrain trade the scheme, does it regiment, does it create in effect a price fixing combination and if it does, it's going to be held in violation of the anti-trust laws regardless of whether or not you have a common law agency or you are a common law consignment arrangement.

And I also urge that even if Masonite doesn't apply we clearly have a limited dispensation of Colgate that Colgate does not in anywise allow dealer or a supplier to utilize a refusal to sell in order to perpetuate a price fixing program.

We do have -- we do know this in the record.

There is a letter that's signed by the agent of Union Oil Company that we are going to police prices and we know from the record here the extend which prices were policed, we know that agents do go on the premises, do talk to these dealers and do utilize the threat of the cancellation in order to carryout this scheme.

I also urge upon the Court, a violation of Section 2 that these are predatory weapons that you do not use under Colgate the power of lease cancellation in order to perpetuate a price fixing program and that the use of these weapons is a Section 2 violation and it shows a specific intent to monopolize that these dealers are independent businessmen, they invest their personal fortunes to go into the business and they are to be free of this kind of a plan to control not only their judgments as to prices but their judgments as to gasoline products.

And I would urge that the Court remand this case to the District Court in order that the question of findings as fact on the use of lease cancellation as a weapon maybe settled in view of the stipulations of the counsel for respondent and I would urge that at any rate the case be remanded for a jury trail on all issues.

And I would like to urge on this question of consignment as such that the dealers were required to sustain a substantial portion of price declines, the risks of insurance were on the dealers, the risks of loss or theft were on the dealers that in the General Electric case when this Court sustained the General Electric consignment program, this seemed to be the very ratio decidendi of the opinion that the company assume all the risks.

And I submit to you that in the consignment agreement of the Union Oil Company especially as it was modified to require the dealers to observe price declines that these risks were placed upon the dealers and therefore that we have in fact a resale price fixing agreement.

Justice Byron R. White: (Inaudible)

Mr. Maxwell Keith: I think under the per se announcements of this Court, the White Motor case that when a company -- I think combination of Moore versus Mead and White Motor that if an interstate oil company compels the acceptance of a price order that you would have a section 4 action.

Justice Byron R. White: (Inaudible)

Mr. Maxwell Keith: Well, I have not taken that position.

I have attacked this as a total regimented system in which all the dealers are treated in this manner of being compelled to sign the price fixing agreement in order to get the station, that's stipulated here and I have attempted to show that this was a vast pricing scheme in the interstate commerce which is applicable to 3000 dealers.

I think the -- I have not placed the case in the posture that Mr. Justice White indicates, but I do think I could based upon Moore versus Mead that if an interstate company utilizes unlawful means, it maybe subject to Section 4 of Clayton Act, by action by an injured single individual.

I would like at this time to call for the attention of the Court, the late decision of the Ninth Circuit Court of Appeals in a service station case called Paul Lessig versus Tidewater Oil Company, which was issued January 2nd 1964.

Unknown Speaker: (Inaudible)

Mr. Maxwell Keith: Paul Lessig versus Tidewater Oil Company.

Unknown Speaker: (Inaudible)

Mr. Maxwell Keith: L E S S I G, versus the Tidewater Oil Company, which is similar to Osborn case in holding that Colgate does not allow an oil company to use the lease cancellation as a device to require the dealer to subscribe to orders which restrain trade.

Unknown Speaker: (Inaudible)

Mr. Maxwell Keith: It's -- there is no citation, it's slip opinion that came out January 2nd, it's numbered 17924, 1924, the case was argued by this counsel and Mr. Lasky was the attorney.

Chief Justice Earl Warren: Mr. Lasky.

Argument of Moses Lasky

Mr. Moses Lasky: Mr. Chief Justice and if the Court please.

Counsel has been presenting this case to the Court in a screen of derogatory attitude and in the setting of some rather general antitrust conceptions.

Now it seems to me and I submit, the case is one of the utmost simplicity.

The facts could quickly be stated and in our submission would dispose of this case as a matter of common sense and so with the Court's permission I shall try to sum up the facts very quickly.

There are of course many ways in which a manufacturer may lawfully merchandise his product.

He may sell it to a middleman and that the middleman resells and in this manner the product will eventually get to the public or he may choose to sell it directly to the public himself bypassing the middleman entirely.

The Antitrust law doesn't prohibit, any -- either one of these anymore than it does the other, it permits both.

Now in the oil industry refiners have used both methods.

Many of them, perhaps most of them, have chosen to sell to middlemen and the middleman resells and in some cases there are a chain of middlemen.

Some like the largest refiner on the West Coast, Standard Oil of California chooses to sell, as this record shows, chooses to sell both ways.

Through its sovereign stations, these sovereign stations it sells to a middleman and the middleman resells, but it also through its Standard's stations sells directly to the public.

Now if a manufacturer chooses to sells directly to the public obviously he must sell through agents.

And those agents maybe wage paid employees as in the case Standard stations, but they need not be and in selling directly to the public Standard stations obviously fixes the price at which each one of those stations is going to sell gasoline to the public and that does not violate the antitrust law as a price fixing arrangement because it is a case of the owner of the property determining the price at which he himself by his agents will sell to the public.

Now there is another ancient, well tried traditional method of selling.

It's not a lawyer's conception and that's the use of commission paid agents.

This is the old consignment method.

In California it is recognized by one of the sections of the civil code which is quoted in the brief, which describes a consignee, and I think I am quoting from memory, an agent who in the pursuit of an independent calling is entrusted with the possession of property of his principle, which he therefore sells on his principle's directions and at the prices directed by his principle.

That code section comes out of the old field draft codes of New York of over a 100 years ago and thence can be traced right back to Blackstone.

Now if the Court pleases, Union Oil Company used to, used to sell to the middlemen and in 1955, it decided it would discontinue that procedure and in 1955, late in 1954 it thought it would go on to consignment in the case of price war emergencies.

It never put that policy into effect.

Instead it decided early in 1955, it would adopt that as a permanent system, system wide and it's thus completely unlike the Atlantic Refining case reasoned before the Federal Trade Commission where the commission said Atlantic Refining would be on consignment one day and purchase and sale another.

Union doesn't do that.

Now let me get over to the question of leasing.

On the West Coast there are over 36,000 service stations according to the statistics in this record.

In about two-thirds of those 36,000, no refiner has any possessory interest whatever.

That is to say the service station is owned by the man who operates it or he leases it from some one who has no connection with the refiner.

Less than a third are owned by refiners, because in the severe competition among the traditional seven or eight majors and the eight or nine or ten additional refiners who have been in there since the war, it has been imperative for the refiner to find an outlet for his gasoline.

And in that process many of these refiners have gone out and bought the fee in service station sites or else they have leased possessory interest.

They have built service station sites and then they have turned around, in case of Standard operated by employees, in case of others they have leased them to operators.

Perhaps one-third of the stations in the West Coast are in this category.

There are 21,000 service stations at least in California on the statistics on this record.

About 1/10th, 2400, sell Union's gasoline up and down in California, but of this number a little less than half Union has no possessory interest at all in it, no lease, no fee, it simply deals with the dealer.

Slightly over half of this 2400, Union does own the property or has a lease on it and sub leases these to dealers.

Justice Potter Stewart: The reason for that is just historical or -- what's the reason that Union has half of its outlets are independent, completely independent operators --

Mr. Moses Lasky: Well, because most service stations sites are held by the dealer or held by independent people who think it's a good investment and lease directly to the dealer.

This is competition between various factors between the various refiners competing for sites and various interests, who think it's a good investment to own a service station site directly so the company doesn't get it.

And I think these figures will vary, but this is a pretty much the position in the whole industry, little less, as I say only about a third of the stations are owned or have any interest in the refiner themselves.

Now as I say in 1955 Union decided that it would not sell gasoline to its lessees anymore.

It continued to lease out its stations but it discontinued selling gasoline to the lessees and adopted the policy of supplying gasoline to these stations only as its agents to sell for it.

I think the record shows at the time of the hearing there were just three lessees who were still purchase and sale.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Moses Lasky: Yes, Your Honor.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Moses Lasky: No they sell to, they will sell to independent stations, but it is very interesting that they also consign and in the so called West Coast Oil case which was suit brought by the United States in 1950, the Court commented that more than 1200 of the people who owned their own stations preferred to be Union Oil consignees because he said and I quote, I've got it in the brief, “The factory setup may provide a security for these dealers, which they find more desirable than the rough and tumble of operating their own business.”

Now let's get down to the terms of the consignment agreement, which have not at all been adequately presented to the Court.

The consignment agreement does not provide that the dealer must or will take any gasoline at all from Union Oil Company.

It doesn't provide you must take one gallon, it doesn't provide that Union must provide any gasoline to him.

All it says is that whatever gasoline Union he sees fit to take and whatever gasoline Union sees fit to supply will be handled by him as an agent.

In other words, when a man become a lessee the consignment agreement made clear, that if he was going to get gasoline from Union, he will be handling it as an agent.

He didn't have to take any.

It didn't preclude him from going out and buying gasoline from anybody else.

Although I should not be surprised if at the end of his one-year lease he had been getting all his gasoline from someone else, I would hardly be surprised that the company might decide that it wouldn't lease to him again and this to me is just commonsense.

Why should it, why should it, it's in business to find outlets for its gasoline.

Justice Potter Stewart: The same thing would be -- obviously be true if he didn't take any gas.

Mr. Moses Lasky: Exactly so and as a matter of fact, if the Court pleases, when a man comes to Union Oil and says I want to be a Union dealer, I want your station painted with all your colors, he is doing it because he wants to handle Union gasoline and not Joe Dox's gasoline.

Now this brings me to Richard Simpson.

Richard Simpson was thoroughly familiar with Union system because Richard Simpson for eight years before 1956 was a wage paid employee of Union and his last job was retail representative, that is to say he was Union's contact to the dealers.

And he was a man in his district, who put into effect the consignment system.

He knew all about it.

He knew that consignment was the only way that Union would merchandise its branded gasoline through its leased out stations.

In 1956, he had an unfortunate automobile accident.

He lost his job with the company and then he came to Union and says well I've lost my job but I would like to be a Union dealer.

I would like to have a station and Union said well we have one in Fresno and he said I want it and he got it, on their standard one-year lease and he signed the consignment agreement.

He brought no inventory to gasoline at that time, yes there was a dealer there was another dealer in there before him and the testimony shows Simpson said no, I didn't buy the gasoline because gasoline was always consigned to me, I didn't have to buy that.

He did put up 15 -- $1300 to buy the tools from the former person.

It was some greases and stuff and Union Oil bought those from the former dealer and sold it to him on a conditional sales contract (Inaudible).

Now nobody coerced this gentleman into taking this station, the word ‘coercion' is being used, nobody coerced him, he wanted to be a Union dealer, he wanted to operate a Union station.

He knew the terms on which it would deal, he took the deal.

Now he testified during the deposition that before the expiration of his one-year term, somewhere he gathered the idea that because Union directed the prices at which he as its agent was to sell its gasoline consignment was illegal, pursued as pricing fixing agreement.

Now – one of the Court asked how long was it he observed consignment?

He filed an affidavit in which he said he observed it, too much -- 57 less then one-year after he first went in.

And then his affidavit said from then on for a while he generally observed it and then beginning about March of 1958, he did anything he pleased absolutely.

Although he got the idea that this was illegal nevertheless he asked for another one-year lease and got it.

He choose to continue with the consignment agreement believing it to be illegal and then he began to violate that agreement, ignoring his instructions that were given to him as the company's agent, he charged more or less as he saw fit when he saw fit.

Now what did Union do?

It didn't sue him, to try to compel him to honor the agreement.

It didn't try to cancel the lease for the consignment, it did not refuse to supply him with gasoline, it suffered the whole thing very patiently outside of protesting to him and waited the passage of time and waited the efflux of time and when his term expired, when on the evening of May 22nd 1958 under the laws of the State of California, he no longer had any tenure or a stake in this property as was later adjudicated in an unlawful detainer suit, Union with prior notice declined to give him a new lease.

It declined to give him a further stake in its California real property.

And when -- he refused to vacate, he brought this suit and got a temporary restraining order against our -- throwing him out and so waited patiently till we had a hearing and then the injunction was denied and then we got -- we sued him in the State Court, got a unlawful detainer and we recovered possession.

Now those are the facts of this case.

Having been denied an injunction to keep him in permanent possession, he amended the complaint to ask for damages.

And the damages he asked for were $150,000 treble because Union refused to give him a new lease on its property.

Now stripped of all verbiage what is Mr. Simpson's grievance?

It is if Union refused to do business with him on his terms, he wanted to do business with the Union, he wanted to occupy its valuable service station site in which it had invested maybe $70,000, he wanted to sell its gasoline but on his terms.

Well there is no foundation in California law for that kind of claim, and so he turned to a federal antitrust violation and he added to makeweight claim.

And when he first sued, his contention was that on March 1958 he wanted to lower his price and we won't let him do it on appeal to the idea that maybe we were over pricing the public, but when he amended, it flipped the other way entirely.

His compliant is that he lost a $1,000 during the term of the two years because he could not charge more than we would allow him, that we made him keep his prices down.

That is of course a makeweight and an afterthought.

Now if the Court pleases this is in my mind a remarkable antitrust case, because it is an antitrust case without monopolization charge and without conspiracy charge.

There is not only but one defendant, which you could have it a conspiracy case, but the case involves the conduct of that one defendant acting alone and it is neither conspiracy or monopolization.

The complaint does not charge conspiracy and in the course of the pretrial conferences counsel told the Court repeatedly, this is not, I am quoting now, “This is not a conspiracy case.

This is a case of the action and activities of a single defendant,” and he said again, “the complaint does not charge conspiracy,” it says “These contracts are in restraint of trade.”

And so the issue of legal validity in this case comes down to one thing, is the consignment agreement between Union and a counselee a violation of the Sherman Act either taken alone or in conjunction with the fact of a lease.

There is no conspiracy with any other manufacturer.

There is no conspiracy charge, factual conspiracy charge with the dealers.

Now, there are two basic reasons, why in our judgment and our submission the plaintiff is not entitled to recover.

As I have just submitted both claims for 150,000 and for the 1,000 start with premise that consignment agreement was unlawful under the antitrust laws as a price fixing agreement.

With that premise gone, the case is gone obviously.

If consignment is valid, it was his duty to observe the prices and he couldn't complain because he couldn't charge more.

Obviously if consignment was valid, he violated it.

Union Oil Company would have been idiotic to continue to give leases to a man who had breached a legal agreement.

So I say that this is the basic premise of the case.

Now the Court of Appeals, however, it didn't reach these questions.

To it there was another ground for why the plaintiff could not recover and so it assumed, it did not decide it assumed arguendo these claims of illegality.

It said, it simply stated it's this, “That whether Union did in someway or other violate the antitrust laws by virtue of consignment and lease, neither the lease, nor the consignment agreement inflicted any damage on Simpson.”

Now this is not a question of how much.

This is a question of causation, namely, that the two items of damage which he claimed are not the result of the, of supposed illegal violations.

Now I must confess that I very much dislike discussing this case in the context of an assumption that we violated the law.

And yet the Court of Appeals did it and I suppose that the questions which appeal to this Court on petition for certiorari must have had some relation to what the Court of Appeals did.

And so with just a slight touch upon validity for the moment I am going to move over to the second aspect of the case and come back to the questions of violation later.

I submit if the Court pleases that consignment in which of course is implicit that the consignor determines the price at his property sold is not remotely illegal.

There is nothing illegal --

Unknown Speaker: (Inaudible)

Mr. Moses Lasky: Oh!

If my words meant to say that an owner or consignor always sets the price, I of course overstated it.

It is true that sometimes a consignor will allow the consignee his discretion in determining the price.

But it's more frequently the owner himself who determines the price.

Now there is no cases that talk about price fixing or horizontal conspiracy have nothing to do with this case and cases that talk about the illegality of vertical price fix, the fixing of someone's resale price had nothing to do with this because we do not hear have a sale and resale.

There was not sale to Mr. Simpson and a resale by him.

Even if there were, as we have submitted in the brief it would be validated by the California Fair Trade Act and the McGuire Act.

Now with that just so I don't leave the impression that this -- that we've done anything illegal, let me move on to the second aspect of this case.

Did he sustain any damage caused by the alleged illegality?

Now no matter how phrased Mr. Simpson's main claim is a claim for damages for Union's refusal to give him a new lease.

Now suppose when Mr. Simpson first saw the lease in 1956 he had said to Union I want a lease, but I won't be consignee.

I insist on buying your gasoline and Union said sorry, we are not selling gasoline to lessees, we only make them agents and suppose he said, I'm not going to be a consignee, because a consignment agreement is illegal and Union said, well we are not going to lease to you and didn't.

Could Mr. Simpson have come in to sue it and compel it to lease a station to him or could he have claimed damages for its refusal to give him a station, because for suit it's reasons for not wanting to lease to him was his unwillingness to enter into an agreement which arguendo we assume for the purposes would be illegal.

Now I submit our answer is obviously not, he could not recover.

Antitrust law imposes no duty on A to deal with B.

Whatever A's reasons maybe so long as it's A's unilateral decision, and so long that there is no monopoly of course, and there is no illegal monopoly of ones own brand.

It's not illegal for one to refuse to deal with another even though his reason is that the other refuses to follow a course of conduct which would be illegal to bind him to buy agreement.

I take it that, that is what Parke-Davis held.

So much of the Colgate doctrine Parke-Davis has still maintained.

Now then what greater right to future leases did Mr. Simpson get, because instead of refusing to sign a consignment agreement, he signed it and then ignored it.

Certainly his rights were not enlarged by the fact that he did enter into that consignment agreement for a space of time.

I submit he did not thereby acquire the right to still further leases.

During the existence of his consignment agreement and lease, if they were illegal, Simpson could have repudiated them, but even so while repudiating them he could not continue to exercise rights that he had acquired from him, he could not say they are illegal, but I still insist upon the rights I got from them and as I take it that is the reasoning of, I believe it was Judge Learned Hand in Ring versus the Authors League of America which we cite in our brief.

Your Honors will perceive that Simpson's business as a dealer was created by the very documents he now challenges as illegal.

Until that lease and that consignment Mr. Simpson never was, and without that lease and consignment he never would have been a Union dealer.

Now the rationale of the Ring decision is that one may not voluntarily put himself into a position or relation, then claim it be illegal and yet insist upon maintaining rights derived solely from them, but Simpson's case is even weaker than that.

Here the duration of the lease and of consignment ended by their own terms in the passage of time and I submit that Simpson cannot claim a right to a new lease by virtue of the fact that for a season in the past he had been a Union dealer, solely by force of a now expired lease and agreement which he claims to be illegal.

Midnight May 22, 1958 Simpson no longer had any estate or tenure in Union's Property under the laws of State of California and the essential question therefore in this branch of the case is whether federal antitrust law somehow imposed on Union a duty to do what state law did not require him to do, give him a further term.

You see what Mr. Simpson seeks is much more than a declaration that his consignment contract was illegal, that's a moot question, because that consignment no longer exists.

No doubt the Attorney General of the United States could bring a prosecution against Union criminal or sue to enjoin the consignment arrangements if it thinks its illegal, but so far as Simpson is concerned, the question of whether his agreement was legal or illegal is a moot question.

I submit that the consignment and lease even granted and assumed to be illegal did not cause your supposed damage of not getting a new lease.

Justice Byron R. White: (Inaudible)

Mr. Moses Lasky: Yes.

Justice Byron R. White: (Inaudible)

Mr. Moses Lasky: Yes, I would -- yes Your Honor.

Justice Byron R. White: (Inaudible)

Mr. Moses Lasky: He could break it.

I would make exactly the same argument whether it's consignment or resale, because for the purposes of this argument I have assumed arguendo that consignment is illegal and the only basis on which I can make that assumption is if you are free to --

Justice Byron R. White: (Inaudible)

Mr. Moses Lasky: Oh definitely.

Justice Byron R. White: (Inaudible)

Mr. Moses Lasky: Yes.

Let's assume if the Court please, I'll take that up now while we're on it.

Let's assume if fixing the sale price under consignment violates the antitrust laws, it must do so because the antitrust law conceives of consignment as sale and resale.

So let's assume that's what it was.

We have in California a fair trade law, quoted in the appendix to our brief which says that you can buy your agreement fixed demands resale price and of course the McGuire Act recognizes that wherever you have a state law.

Now here is an agreement that says a written agreement that says, he'll honor this price.

Counsel in his reply brief has said well something about non-signers, but I'm not talking about non-signers.

In all these consignment agreements they are all signers and the question is could we have enforced that against him.

Counsel has also said well the McKesson & Robbins case says you can't enforce a fair trade agreement where you sell in competition and I don't dispute that, but we don't sell in competition.

The record shows if Union has 12 stations in California maintained by it's own employees, training stations, 11 of them in Los Angeles area one in San Francisco.

Now as the Chief Justice knows the City of Fresno where this station of Mr. Simpson was located is about 200 miles from the one and about 200 miles from the other, they are not in competition, in other words Union Oil Company is not selling to the public in Fresno unless I am right that it was selling to it's agent in which event Mr. Simpson was not it's competitor and if Mr. Simpson bought from them and resold then Union was not selling in Fresno and so I've always contended that even if consignment was resale and even if we did have a resale price fixed here it was perfectly legal under the California Fair Trade Act and the McGuire Act.

I've taken up that point out of order, but I was addressing it to a comment of Your Honors.

Now let me take the second aspect of this case, the claim $1,000 damages.

Still assuming that the consignment agreement violated the law, the Court of Appeals said the man says he suffered a $1,000 damages because he couldn't charge what he wanted, but he said he did charge what he wanted whenever he wanted to charge more or less he did it, how could he say he could not?

Well Mr. Simpson says well the contract bound me, but if the contract was illegal he wasn't bound to or pay any attention to it and he didn't.

Then counsel says or his client says well I thought that if I didn't observe the prices I wouldn't get a new lease and so we're back to the first point again.

Certainly people in business are constantly confronted with economic choices, business relations if they follow one course the relation will exist, if they follow another will not, and I assume that Parke-Davis in saying that you could announce to your customers if you have a policy and that you won't deal with them if they ignore the policy, would give us a right at the end of the one-year lease if we didn't like his pricing policies to discontinue.

There is on this one more point if the Court pleases?

Where A agrees with B to perform a certain line of conduct and from time-to-time it does so, he cannot then recover damages from B on the theory that B could not have compelled him to perform the contract for illegality, I submit that to be true.

A party to an illegal contract may ignore it if he wishes.

If sued illegality would be a defense, he cannot however observe the contract and then recover treble damages or having done so.

Now this isn't a question of pari delicto and it isn't a question of unclean hands.

Counsel has tried to inject those issues into this case, they are not here.

The point is that when I as Mr. Simpson choose to sell at a certain price I'm selling at that price, it is my act not somebody else's act.

And so I submit that the Court of Appeals was entirely correct in both of its decisions on the $1,000 damage and $150,000 which is assuming that somehow we violated the Sherman Act arguendo, nevertheless there could be no recovery because the aspects of damage which he claimed are not caused by the alleged illegality.

Justice Byron R. White: (Inaudible)

Mr. Moses Lasky: There's quite a history.

Justice Byron R. White: (Inaudible)

Mr. Moses Lasky: He was motivated by -- in part by McKesson & Robbins.

McKesson & Robbins would give them a problem, for example in Los Angeles.

They could not have fair traded in my judgment because they had 12 stations there of their own.

Shortly before the adjournment yesterday, Mr. Justice White asked me some questions about the numbers of stations and summed up the figures and I affirmed them.

Now to be sure that I did not misunderstand I am going to state just what the figures are.

The reference to the record is pages 333 and 334.

The total number of stations selling Union’s branded gasoline in California is 2,377.

Of this number in 1,335 Union has some sort of possessory interest, either the fee or the master lease and of this 1,335 stations all but three are consignee stations, the lessee is a consignee.

Now of the 2,377 total stations, in 1,030; slightly less than half Union has no possessory interest of any kind whatsoever.

They are owned by other parties unconnected with any refinery, and of the 1,030 stations in which Union has no possessory interest, approximately 80% are also consignees, that is to say these 80% who have no landlord-tenant relationship to Union have chosen and preferred to be consignees instead of buying and selling and this reminds me again of the remarks made by the District Court in the West Coast Oil case when he summed up the situation, that this vast number indicates that they would prefer the security of a consignment system to the rough and tumble of being merchants buying and selling.

Yesterday I but briefly indicated a statement that the Union Oil Company had not in fact violated the antitrust laws or any part of them in any respect whatsoever and I had submitted to the Court that the basic question there, the basic attack of the plaintiff, the petitioner, the fundamental one was his consignment in which the consignor determines the price at which the consignee is to sell the consignor’s gasoline is that price fixing, illegal price fixing agreement?

And I submit it was not because one does not violate the law on determining the price at which his own property is to be sold.

And I therefore submitted that cases like the Masonite case are not in point because Masonite was a horizontal conspiracy and of course we have no questions at all about the illegality of any kind of horizontal conspiracy about price, nor I submit were the resale price maintenance cases have any bearing here, holding vertical price fixing illegal because there was no sale and resale, although I also submitted that if this were a sale and a resale, the California Fair Trade Act and the McGuire Act would also legalize the transactions.

Justice Byron R. White: (Inaudible)

Mr. Moses Lasky: If not consignment, yes Your Honor.

If it were sale and resale and wasn’t in a state that had a Fair Trade Act, I don’t doubt its illegality.

Justice Byron R. White: (Inaudible)

Mr. Moses Lasky: Yes.

Justice Byron R. White: Whether or not the (Inaudible) California law insulates the kind of an operation you got hasn’t been determined in this record, has it?

Mr. Moses Lasky: No the Court of Appeals did not pass on it.

Justice Byron R. White: It had never been an issue in the case.

Mr. Moses Lasky: Yes it was an issue in the case, but no court ever found it necessary to decide it.

The District Court held that consignment was consignment and was legal and that there was no actionable damage and the Court of Appeals didn’t reach any of these questions of --

Justice Byron R. White: But I'm just -- you suggest that even if this were a sale and a resale of California law and McGuire insulate it, but we couldn’t decide that here, we would have to send that back.

Mr. Moses Lasky: No court below has determined it, but if I understand the law correctly when a case is before this Court, it can affirm upon any legal question that’s involved.

Now all the facts upon the McGuire Act are here in the record and it was an issue in the motion for summary judgment, all the record was made and the laws, the law which the Court takes judicial notice.

So unless I'm in error upon my understanding, if the judgment is correct upon any ground, it is correct and it had to be affirmed.

Justice Byron R. White: Are the facts of the record that you have no owned station?

Mr. Moses Lasky: Yes, oh that’s in the record.

Westway is a – number one on Westway there -- Westway is a subsidiary, the evidence is union has an interest in it and Westway has no stations except in Oregon and Washington and the Los Angeles area, nothing in the Fresno area.

The record is clear on that also.

Oh! No the record is quite complete.

Justice Byron R. White: And Union has none of its own --

Mr. Moses Lasky: That’s right it has no station operated of its own.

It only has 12 in California, of which in 11 are in Los Angeles area and one in San Francisco, and Fresno is about 200 miles from each of these places, no the record is quite complete on this.

Justice William J. Brennan: May I ask you Mr. Lasky --

Mr. Moses Lasky: Yes Your Honor.

Justice William J. Brennan: If this arrangement tantamount for a sale – for resale for purposes of the antitrust law, does it necessarily follow that it comes within the sections if that’s what they are, of the California Fair Trade Act?

Mr. Moses Lasky: Oh I think so absolutely, and for this reason.

If this a sale or resale then you’ve got a contract --

Justice William J. Brennan: Well now I say my premise was that it’s the equivalent of a sale -- the resale for purposes of federal antitrust laws.

Does it follow that is for the purposes of the California Fair Trade Act?

Mr. Moses Lasky: Well I must confess I have difficulty of seeing how it can be – it is either fish or flesh and it can't be something else.

It's either consignment or it’s sale and if it’s sale it seems to me it comes exactly within the terms of the Fair Trade Act that a vendor can enter into a contract with his vendee determining his price.

I've always taken the position though that it's just what it says it is consignment, and that’s what I'd like to present to the Court now.

Justice Tom C. Clark: I say with the dealers you never mentioned the fair trade, did you?

Mr. Moses Lasky: The term fair trade was never mentioned to the dealers, but this itself would is not necessary because there is nothing in either the California Act or the McGuire Act decision which used some magic term fair trade, it says all you need to do is to enter into a contract with the buyer, fixing his price and this contract does it.

Justice Tom C. Clark: (Inaudible) while you had to give notice.

Mr. Moses Lasky: Oh yes, but to -- that’s true, we have no question about non-signers here because the question is only could we bind our consignee and every consignee has signed this agreement, so we don’t have a non-signer problem here at all if the Court please.

Justice Tom C. Clark: On the consignment I'm not sure I have all the facts.

When a man like Simpson starts out, let’s say he just leased the station and you deliver your first tank of gasoline to him, what happens then?

Mr. Moses Lasky: Nothing at all, he gets the first tank of gasoline and he does not pay for it.

Then when this is exhausted in whole or in part and another truck comes up replenishes it, he accounts for what he's already sold.

So he never --

Justice Tom C. Clark: He gives you a bond or any --

Mr. Moses Lasky: No.

Justice Tom C. Clark: Escrow on the proceeds?

Mr. Moses Lasky: The proceeds -- the agreement provides that he must keep the proceeds separate.

Justice Tom C. Clark: But on the first tank, why he doesn’t give you any escrow (Inaudible)

Mr. Moses Lasky: No he doesn’t.

Now in this particular case, a man named, the record shows this, a man name Gregorian had been the prior lessee and when Mr. Gregorian left and Mr. Simpson came in, Mr. Simpson bought Gregorian’s tools and there was a stock of tires and accessories which Union had nothing to do it, and Union bought those and sold it to Mr. Simpson on a conditional sales contract, financed him, but upon the gasoline he testified, this is in my brief at page 57 and from 311 of the record about this very episode.

Did pay buy the gasoline, but not gasoline?

He says no, it didn’t include gasoline because it was on consignment, so he never paid for that.

Now, I submit to the Court that the consignment question has been flatly ruled on by this Court in United States versus General Electric Company in 272 U.S. 476.

There General Electric some years before had been subjected to a decree, enjoining it from a conspiracy to fix resale prices and thereafter it devised a consignment scheme and as shown by the opinion of this Court, it presented the scheme to the Attorney General for his approval or disapproval and as the Court notes in the opinion, received no reply of any kind whatsoever, but it put the plan into effect and this Court held the consignment was clearly legal.

Now I call attention to that because in this Union’s consignment system has also been presented to the Attorney General and has been approved.

I say that because in the West Coast Oil case where we hammered out a consent decree, that consent decree specifies that every refiner on the West Coast, every refiner defendant must gave to -- both a supply agreement and a lease and says the supply agreement maybe a consignment agreement or a purchase and sale agreement and it defines a consignee in the terms of the California Civil Code as an agent, who in the pursuit of an independent calling will sell the gasoline to the refiner at the prices specified by the refiner.

Now the record also -- this case discloses something else.

That decree in it's draft was clear to me, but to be sure that there was no misunderstanding with the Department of Justice, I wrote the Department of Justice a letter before I signed the consent on behalf of Union and asked if they construed it the same way and at page 330 of this record you will find a letter addressed to me from the Department of Justice saying that the provisions of that decree against resale price maintenance, and the decree went into effect I may say lay after, less or after Mr. Simpson was out of our station, says that, that of course does not apply to the consignor fixing the price at which his consignee may sell.

So unlike General Electric, Union’s plan has been before the Department of Justice, has met with no objection, and has been held to be legal.

Of course that’s not binding on the Court, but it does show what a law enforcement agency thinks of the matter.

Unknown Speaker: (Inaudible)

Mr. Moses Lasky: Your Honor that letter appears at 330 of the record.

Now early this year in the State of California they finally reached -- the highest courts that had the question, appellate court, the question whether exactly this kind of consignment arrangement by a refiner violated the California antitrust law which of course is the same as the Sherman Act.

And in the case Shasta Douglas Oil Company versus Work, the Court held that patently it did not, because the consignee is an agent and the consignor can set his prices.

It is very interesting to observe that only a few months ago, the Uniform State Law Commissioners had attempted to draft a Uniform State Antitrust Law prepared and as pointed out in my brief at page 41, that draft makes it explicit, that consignment transactions have not been included because the principle is at liberty to control the price and other terms upon which his agent may dispose of his commodities or service.

And in the famous Standard Oil versus United States in 337 U.S., the Standard Stations cases, there was as I recall the statements in the opinion and in a dissenting opinion that if exclusive dealing contracts were outlawed, the companies would very likely go back to owning their own stations and selling through their wage paid employees or through consignment, either scheme of which would be legal.

Now I therefore enquire how is it that the counsel for Mr. Simpson contends that consignment has suddenly become illegal.

I had thought until yesterday at about five minutes before counsel finished his argument, that he was turning it upon the fact that there not one consignee but a great many.

That contention would not have been a sound contention, because exactly the same argument was made to this Court in the General Electric case.

In the Court’s opinion it points out how the government had argued that there were so many, such a great number of stations consignees, 401 class and 22,000 in the other and this Court said it made no difference because the distinction between agency and purchaser, be it as clear both in law and in fact that of course if you stopped to observe, the number would make no difference because economically the same result would follow if Union took over these 1,300 consignee stations and put wage paid employees in.

It would then control the direct retail distribution of 1,300 stations and counsel conceded in the Court below there would be nothing illegal about that.

So the illegality, if there is any, cannot come in because there is more than one station.

It would have to come in because it is consignment or not, and counsel as I understood in yesterday and a reply to a question by Mr. Justice White said his contention would be the same even though there was but one consignment.

Now counsel’s next point of attack if I understand him correctly is purpose, our purpose he said was to fix price.

Well at the time of the case heard below in order to eliminate all issues of fact I stipulated that, that was one of our purposes not that we could control a resale price, no, but so that we could control price at which our product was sold, but that’s irrelevant and let me quote to the Court from this Court’s decision in the General Electric case again.

“The plan was of course devised for the purpose of enabling the company to deal directly with consumers and purchasers and doubtless was indented to avoid selling the lamps owned by the company to jobbers or dealers and prevent sale by these middlemen to consumers at different and competing prices.”

That’s the quotation from the Court.

Nevertheless this Court said it made no difference, because the distinction in law and in fact between agency and sale is clear.

Now at the very close of the argument yesterday, Mr. Justice White asked me why we shifted, why Union shifted in 1955, and in the haste of the red light in front of me, I did not give a full answer.

I mentioned McKesson & Robbins decision had some effect upon it.

The story is this.

There are of course advantages and disadvantages to each of the several merchandising methods available to a manufacturer, and he must make his choice, if he takes one he has some advantages and he has some disadvantages.

Now another disadvantage of using middlemen, selling to them and having them resale in this business is, and this Court knows it very clearly certainly in view of the recent Sun Oil decision, the veritable host of problems and dilemmas you have under Robinson-Patman.

Another is the fact that if you don’t sell through these stations as your agents, the quality of them can run down and they won’t give the proper service.

Now in a Union station, they are in Union’s colors, this is where Union meets the public face-to-face, and to the public these stations are Union and Union’s reputation turns upon the kind of service it gets there and therefore the company has an interest in having something to say about those stations and of course if it sells through them and the resale it has nothing to say about them, except in a very remote kind of way.

Now these disadvantages Union wanted to eliminate.

They could have been eliminated by doing what Standard Oil does, put wage paid employees in, but there Union ran up against what it conceived to be another disadvantage.

A wage paid employee has no stake in the community.

He is not -- he has no incentive and Union felt that if it had consignees who received a commission they would have a status of businessmen in the community, they would have an incentive.

Now Union’s merchandizing judgment may have been sound, may have been unsound in weighing these advantages, but it wasn’t I submit, illegal.

There were advantages not only to Union, but of course there were advantages to the consignees and we come back to the fact that 80% of those who have no landlord or tenant relationship to Union still saw fit to be consignees.

There are disadvantages, many disadvantages to Union.

For example there was a decision rendered by an intermediate California Appellate Court last year that held Union liable for tort, personal injuries for the negligence of a consignee, because he was his agent.

So it happened that the Supreme Court set aside that decision on the grounds that there was in that case no cause or relationship on the act of any defendant in the case, but this is the kind of risk we run and we take this risk and disadvantage in order to balance off the whole picture.

More than that, not all the burdens which have been shifted from the dealer on to Union by virtue of the consignment arrangement, and this brings me directly to the question of whether is this consignment or is it sale.

Counsel has contended it’s sale, but note this is a pure question of law, counsel has never said that he intended to prove or wanted to prove that this arrangement was something other and different than what it appeared to be on the face of the documents.

He made clear from the very beginning that he was saying that on the face of the document he contended it was sale and one of the first pretrial conferences where we tried to delimit the issues, he said, “I say”, and I'm reading from 378 of the record, he says “I say there are two issues in this case on the issue of liability, number one the consignment agreement is unlawful on it’s face as a matter of law.”

And this of course I would have no objection to presenting in a pretrial of partial summary judgment.

The other issue he said was whether we had coerced him and I asked do you mean by coercion anymore than the fact that if you wanted our station you had to get it on the terms we offered and he says that’s all I mean, so I stipulated well those are the facts, if that’s coercion that’s coercion, which took that issue or fact out of the case.

Justice Byron R. White: (Inaudible)

Mr. Moses Lasky: Pardon.

Justice Byron R. White: I gather going back again on the assumption that this was a sale and a resale or equivalent thereto, you then said that now you might be in some trouble if this were a resale price maintenance fix, and assuming no insulation from California law.

Mr. Moses Lasky: Yes.

Justice Byron R. White: But in that -- on such assumptions just there would be coercion, I mean it would violate the antitrust laws.

Mr. Moses Lasky: Oh let me state this.

If this is not consignment, and if it is sale and resale, and if we don’t have the McGuire Act, I can’t see any answer to the conclusion that the agreement, the written agreement was illegal violation of the Sherman Act.

Justice Byron R. White: And terminating his lease because he won’t live up to it is --

Mr. Moses Lasky: Not at all.

Justice Byron R. White: Well that’s the issue --

Mr. Moses Lasky: That was the point I wished to submit yesterday.

Sure we could then be prosecuted by the Attorney General criminally.

We would be subject to a suit in equity by the Attorney General to enjoin us from continuing the progress.

Justice Byron R. White: Yes.

Mr. Moses Lasky: But I tell the difference --

Justice Byron R. White: This fellow is still you would argue had his eyes wide open, went into it himself, he could have breached the contract any time and make the same arguments you do with the consignment.

Mr. Moses Lasky: Exactly so.

The identical argument I made yesterday.

The argument I made yesterday went off on the assumption arguendo that the whole consignment arrangement was an illegal violation of the law and I did that upon the assumption that you’d call it a purchase and sale, because I can’t conceive how otherwise it could be illegal.

That was the whole brunt of my argument yesterday if the Court pleases and that is the position the Court of Appeals took.

They said assuming arguendo illegality, nevertheless the failure to get a new lease was not the result of that consignment agreement.

It was that Union exercise it’s judgment when then tenure expired not to give them a new statements property

Justice Arthur J. Goldberg: (Inaudible)

Mr. Moses Lasky: Yes Your Honor.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Moses Lasky: Not doubt about it, I stipulated it to that, in order to remove that from an issue of fact, there is no doubt about it.

Then what do we have, we have a case where a man refuses to clearly on a course of conduct which it would be illegal to bind him to by agreement.

This is the assumption, but I thought the Parke-Davis case certainly held so much that acting not in conspiracy with anybody else you could refuse to deal with a man even for that reason, and there’s a host of cases that have so held because the refusal to give him a new lease is still our unilateral decision.

Now in a conspiracy case it isn’t the decision of the man who cuts them off, his decision becomes the decision of a group of conspirators, but absent conspiracy, absent monopoly, I submit that that is the law, that you can refuse to enter into future business relations with a man even though your reason for doing so is his refusal to go along with an illegal course of conduct.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Moses Lasky: I submit not, I think clearly of course a man could not in the first instance come in and say I want that lease and you’ve got to give it to me because your refusal is based upon my refusal to be a consignee.

But as I submitted yesterday he now enters into the agreement and then the day after he says I enter into it he breaches it and by this welshing upon the deal, even though the deal is illegal he gives himself some kind of tenure beyond the scope of state law which otherwise he did not have.

Now this is certainly a curious logical result.

It comes back -- yes Your Honor.

Justice William J. Brennan: (Inaudible) Parke-Davis, that fact now that a refusal to deal because purchaser wouldn’t violate the antitrust laws, is that right?

Mr. Moses Lasky: Your Honor wrote that opinion and you know better than I what you had in mind, but I certainly so read it.

I understand Parke-Davis to do this.

The question there was whether there was a conduct, this was a suit by the United States, no question of whether it caused damage, the sole question was legality or illegality of conduct.

And I thought that what the Court did is to draw a line of demarcation and said that if you announce a policy that you expect that you -- price policy among other things, that you expect your dealers to follow and they don’t follow it and you cut them off, that’s unilateral conduct and does not violate the law.

If you go beyond it, the facts may be the basis of inferring a conspiracy.

Justice William J. Brennan: Yes, but I thought you were arguing this on the premise here as to the people with the deal would be, because he refused to sign an agreement which concededly would violate the antitrust law.

Mr. Moses Lasky: Yes Your Honor.

Justice William J. Brennan: Have you thought Parke-Davis at that point?

Mr. Moses Lasky: I certainly did, I certainly did.

Justice William J. Brennan: I’m surprised.

Mr. Moses Lasky: Well to that I can only reply if Your Honor please, I think the bar would be surprised to learn that Parke-Davis does not so hold, because you have granted.

In this case you do not have to look at a lot of external circumstances to infer the existence of an agreement as you did in Parke-Davis.

Here the agreement is expressed, explicit and in writing.

That agreement is either legal because it’s consignment and because the McGuire Act protects it or it is illegal.

This we don’t have any difficulties on this.

If it is illegal, why doesn’t then vendor still have the right to say this is my real property, the estate that the gentlemen has, has expired, why do I have to give him a further tenure and the only answer would be, well because you have violated the law up to now.

There is an additional penalty that you must now give this gentlemen, a conditional tenure that the state law does not entitle him to.

Now if that is the law --

Justice Byron R. White: (Inaudible) law you probably would have had a lease renewal?

Mr. Moses Lasky: Yes.

For the purposes of this case I stipulated that the one -- the reason he did not have his lease renewed was that he had violated that agreement.

Now I said there were other reasons and the trial court says, well why don’t simplify it, don’t you just rely on the one string to your bow and I did, that’s the state of the record before this Court.

We did everything in our power to get this thing into a posture of a clean set of questions of law.

Unknown Speaker: (Inaudible)

Mr. Moses Lasky: Yes, Your Honor.

Justice Hugo L. Black: (Inaudible) I suppose why did you have to wait on your argument until the lease expired, why didn’t you just cancel it?

Mr. Moses Lasky: We had no right under the lease to cancel it.

It was a one year lease, absolute with the right in the lessee to cancel on 30 days notice, but no right in us to cancel.

So we couldn’t do it.

Justice Hugo L. Black: If you had had a right to cancel it in the contract, your argument would define a cancellation, the same as it does failure to renew it, is it not?

Justice John M. Harlan: (Inaudible) consignment in the record, they are part and parcel of the same (Inaudible)

Mr. Moses Lasky: They were signed concurrently.

They are two different arguments, they were signed concurrently.

The consignment provision agreement provides that it’ll run for a year and thereafter until cancelled and will also terminate whenever the lease should terminate.

Justice John M. Harlan: Getting that is something (Inaudible) Parke-Davis.

Are you in a position because in addition to refusing to deal you cancel the lease or --

Mr. Moses Lasky: I think we are in a much better position.

Justice John M. Harlan: Why do you refuse to renew?

Mr. Moses Lasky: I think we are in a much better position.

I think it’s always been said there is a basic right to a manufacturer that he doesn’t have to sell to anybody.

Now even if, if that rule is eroded, if erosion has set in on that, I think it’s quite a different proposition to say that you’ve got to lease real property to a man, to give him a tenure.

Now if Mr. Simpson owned his own service station, and we declined to deal with him further, then we’d have a pretty close to a Parke-Davis situation.

But he didn’t own his service station and the question is can he get a lease and tenure of real property from us and I think that is an enormous jump from any distance that any court has yet seen fit to go on the erosion away of the old Colgate doctrine.

Well the light is on so I submit that the judgment should be affirmed.

Thank you.

Argument of Maxwell Keith

Mr. Maxwell Keith: May it please the Court.

I think the key phrase before the Court is in restraint of trade.

I think it is clear throughout the decided decisions of this Court that the central question is purpose and effect, regardless of the form that is used, and this is to carry out congressional purpose that any form, any scheme, any device that restrains trade and cripples the liberty of individuals, is contrary to congressional statute.

The purpose here was not to arrive at some form of business relationship in order to give the dealers all that Union could.

The purpose is in the record, it was to control prices in a price war situation.

The original thought here was that when the price war broke and ended that the consignment relationship would be ended and the dealers will be put back on purchase and sale.

Later this was changed to make consignment a means to control prices, because the price war market was never -- had never ended and price wars continued throughout this period of time because of economic reasons.

Justice Arthur J. Goldberg: (Inaudible) California Fair Trade Law --

Mr. Maxwell Keith: The effect is clear.

There is a document in the record explaining how this plan was to work.

Under statutory scheme you have to have uniform prices.

Under this consignment arrangement Union Oil wanted to control prices at individual service stations without regard to a uniform price, which is a requirement of statutory scheme and of course as this Court pointed out in McKesson & Robbins either you follow the statutory scheme or you’re in per se violation of the Act.

Now 256, it says we are going to end zoning pricing and we are going to where you find it necessary to partially meet, cut price activity in the part of our major competition the retail price maybe set for any service station handling our products under our consignment agreement at $0.01 per gallon over the price of house-brand gas of a major competitor that is posted at the major station inside of our service station.

In other words, pricing is to be based upon what can been seen by a representative of United Oil Company as he tours the area and that is going to be a different price, then he cannot, then the service stations that he cannot see, in other words you might have a distance of five blocks and you have various prices.

Now of course this is beyond the scope of any fair trade scheme.

Justice William J. Brennan: How do you answer Mr. Lasky’s article assuming this is a (Inaudible), based on the California Fair Trade Act and the McGuire Act, how do you answer that argument?

Mr. Maxwell Keith: That fair trade under statutory a scheme is limited to a uniform price, that is established for the trade.

In other words, when you enter into fair trade program you tell the dealer we have a fair trade price and this is to be followed and the expectation is that every other dealer is going to charge that same price.

Now they have an inside price program.

In other words, prices are going to vary within a few blocks of each other.

Now this is beyond, as I understand a fair trade, beyond statutory purpose.

Justice Byron R. White: In Fresno?

Mr. Maxwell Keith: Yes in Fresno, we’ll find maybe 15 different prices in Fresno in a price war situation in the city.

We have that all documented.

Justice Byron R. White: And this is characteristic in fair trade laws, that unless you get the protection you asked for (Inaudible) people you are not bound legal?

Mr. Maxwell Keith: No, under -- if they had a fair trade program, virtually every dealer in Fresno will be charging the same price.

The statutory scheme is a uniform price designed to protect the trademark.

In other words, we -- the argument for fair trade and the statutory -- and the sanction of it by the courts is that as a trademark owner, we don’t want to have various prices, we don’t want to have the public think in terms of other than what price we establish, so that they have a uniform price to the public.

Justice Byron R. White: (Inaudible) whether or not this system is or isn’t protected by the Californian regulation?

Mr. Maxwell Keith: No I would urge that McKesson & Robbins would preclude that because the answer, record 91 says we went off fair trade, we were on fair trade and then we went off, and they use consignment as the way of fixing price.

Now if you don’t have one single dealer in the state knowing about fair trade, you cannot have a fair trade statute as a protection, as I understand the McKesson & Robbins decision.

Unknown Speaker: (Inaudible)

Mr. Maxwell Keith: The GE case of course is not the last word in consignment.

The last word is Masonite from this Court and the last word is the Atlantic Refining Company case from the Federal Trade Commission.

Justice John M. Harlan: (Inaudible) if this question of consignment is going to be reexamined it ought to be done in a government case not a private (Inaudible)

Mr. Maxwell Keith: Well I -- of course I.

Justice John M. Harlan: I was wondering whether you have to go further, you have to get away from (Inaudible)

Mr. Maxwell Keith: Well if the government did attack consignment, then it has now established in two cases, the Atlantic Refining case and the Sun Oil case that consignment cannot be used as to means to control prices in a price war situation.

So that the government has gone into this area and has ruled against the basic argument here, the consignment is some sort of a magic wand that protects price fixing.

Justice John M. Harlan: (Inaudible)

Mr. Maxwell Keith: No.

There’s another Sun Oil case Your Honor, the Federal Trade Commission versus Sun Oil which was decided by the Federal Trade Commission in May of 1963 and there it has held that under Masonite when we have an obvious scheme to control prices.

The facade of consignment is not going to protect the oil companies, that they have to really effectuate a true consignment situation which was not favorable -- was not before them.

Justice John M. Harlan: Well we have decided (Inaudible)

Mr. Maxwell Keith: Pardon me.

Justice John M. Harlan: This Court has decided (Inaudible)

Mr. Maxwell Keith: This Court has not held -- has not had a gasoline stations consignment program before.

However, in Masonite it said that the form that is used is not determinative, that Masonite you will assume that there was a valid agency relationship, creditor-agency relationship and that the essential question is one of purpose and effect and that if the scheme or the device restrains interstate trade and commerce under congressional statute, that the scheme must be stricken.

Now I submit that what Union Oil here is trying to do is get the best of all possible worlds.

It is trying to have independent businessmen and control their prices as though they were their employees and yet it is not willing to treat them as employees and respond to state legislation with respect to employees, workmen compensation, unemployment insurance, social security and of course the federal NLRB statutes would interfere if these were agents.

So it’s trying to get the best and I submit that under the Sherman Act, if these agents or these dealers are independent businessmen by a lease of Union Oil’s own creation, and that you cannot lease on condition that prices be fixed.

Mr. Maxwell Keith: Of course I have argued yesterday that the crux of this case is the means that are used, that you cannot utilize a short-term lease, plan to use a short-term lease as a means of controlling prices and this is a kind of a means that the Court stated in Parke-Davis could not be used, this not simple refusal to sell supplies.

This is a destruction of a business that has been built-up by hard work and many hours of work each day.

Justice John M. Harlan: (Inaudible)

Mr. Maxwell Keith: The Fourth Circuit has answered that in the Osborn case, that you cannot use refusal to deal to form an arrangement of the type that is forbidden by the Sherman Act, that is price fixing, exclusive dealing and tie-in.

Justice John M. Harlan: Even though it’s unilateral?

Mr. Maxwell Keith: Even though it’s unilateral, you cannot use this unilateral refusal deal to establish the type or a kind of restraint that is traditionally prohibited by Sherman Act litigation.

Justice John M. Harlan: Would you think Colgate, the old Colgate doctrine is going down the drain?

Mr. Maxwell Keith: No I think that the courts --

Justice John M. Harlan: This must be under your view –

Mr. Maxwell Keith: No it’s a question of unlawful purpose.

Now if the Court is faced with an unlawful purpose then Colgate cannot be used as defense and I would point out to the Court that before circuit in Osborn pointed out that, that Colgate is a defense usually in a conspiracy case and it is not to be used as a defense when you are talking about damages which flow from an illegal restraint or you talk about the use of the refusal to deal to perpetuate in unlawful kinds of conduct.

Unknown Speaker: (Inaudible)

Mr. Maxwell Keith: Your Honor I submitted to the Court statements and summary judgment claiming there was a conspiracy, that the effect of this arrangement was to establish a combination between the dealers and Union Oil Company and the Court at record 350 acknowledges this, he said I did interject object conspiracy in for the record.

I think this is the question of legal words.

You have a scheme here.

The effect of the scheme, the legal contemplation is a combination between the dealers and Union Oil Company to fix noncompetitive prices, of course that is effect.

But as I read Dr. Miles I understood the Court to say that the system of contracts, written contracts which bind parties to charge a supplier’s price was beyond the power of the supplier and that it was basing it as a matter of voidness to common law and under the Sherman Act, and that in effect the company was creating a combination, I urge this to the Court below --

Unknown Speaker: (Inaudible)

Mr. Maxwell Keith: I urge that to the Court below, yes sir.

Justice William J. Brennan: That is only one agreement (Inaudible) as a unilateral arrangement between Union and Simpson, that was the part from the relations with other dealers (Inaudible)

Mr. Maxwell Keith: My main bow was the Richfield Oil case that you cannot use lease cancellation as a means of perpetuating price control.

Justice Byron R. White: (Inaudible)

Mr. Maxwell Keith: That is the inference from record 256 and all of these policy letters which show that the consignment prices are to be based upon what competition charges, either Standard Stations or major, now this is not off brand competition this is major competition.

So that the prices will vary depending upon what Standard Station charges and Standard Station charges various prices within the single zone or a single city.

So there was no attempt here, as you read these policy letters, I’ve cited those references in my reply brief at page 16, that’s 251.

Chief Justice Earl Warren: Page 16?

Mr. Maxwell Keith: 256 yes Your Honor, so that there isn’t any attempt to follow any statutory scheme of a single uniform prices here.